Could the Federal Reserve have another surprise looming for gold investors this week?
It wouldn’t be the first time. The Fed has to keep news of its plans as secret as possible in advance of meetings like the one that starts today.
Still, they give indications that help guide the market. For example, everyone already knows our central bank is likely raising interest rates at their meeting this week, perhaps by a quarter-point.
What does this expected rate hike mean for gold this week? Market watchers think a 0.25 percent rate increase is already “baked into” the gold market, so any additional surprise could be a positive for gold.
“Gold and silver will survive yet another rate increase. And prosper, quite frankly,” says billionaire investor Eric Sprott.
So what’s the possible surprise?
Carsten Fritsch, analyst at Commerzbank, says “the meetings of the Federal Reserve and European Central Bank will play an important role for gold.”
“While there is every likelihood of the Fed raising interest rates again, the ECB may announce that it will be ending its expansionary monetary policy,” he said.
Sharp eyed investors should consider the second half of this statement carefully. This is where the surprise might come in.
GOLD AWAITS CRITICAL FED DECISIONMAKING
If the Fed decides to end its balance sheet runoff sooner then anticipated, we could also see their much bally-hooed rate-hiking cycle end more quickly than expected.
Less rate hikes ahead could be good for gold.
“There is a very active debate about how far the balance sheet contraction should really go,” said Fed expert Lou Crandall, chief economist at research service Wrightson ICAP.
In October 2017, the Fed has been quietly reducing Treasury debt and mortgage-backed securities on the balance sheet: $102 billion worth!
Now (according to minutes from their May meeting), Fed officials are not pleased that the effects of this activity.
“We believe the Fed has become increasingly concerned with the tightening in money markets over recent months and the pace by which its target fed funds effective rate is moving,” Mark Cabana, rates strategist at Bank of America Merrill Lynch.
Closing the roll-off program earlier than expected could mean we’re nearing the end of this rate-hiking cycle. With inflation remaining muted, even individual Fed members have expressed their belief that the funds rate won’t need to rise much farther.
The balance sheet rundown will be done “by the middle of next year,” Crandall said. “I don’t think that’s unrealistic.
Have concerns about what this potential surprise means for you and for gold and silver? We’re not surprised, and we’re here to help.
$37 MILLION CRYPTO HEIST BLOWS BITCOIN OUT OF WATER
We’ve done our best in this letter to warn our readers about the pitfalls of cybercurrencies. The events of the last week are a sad example of why.
South Korea crypto exchange Coinrail was just hacked over the weekend. They say their system was hit by a sinister “cyber intrusion.”
The damage? A loss of a staggering 30 percent of the coins traded on the exchange. Probably over $37 million dollars worth!
But it quickly got worse as bitcoin got crushed. The heist at Coinrail kicked bitcoin down to two-month lows as it once again highlighted the security risks and the weak regulation of global cryptocurrency markets.
Market watchers and regulators are now once again having to demand answers about security across all virtual currency exchanges.
Apple just announced a new rule banning digital mining on all Apple devices such as iPhones, iMacs, iPads, and more. The change, which was only noticed on Monday, was likely driven by concerns over cryptocurrency mining draining device batteries.
The Coinrail break-in is just one of a stream of high-profile crypto hacks:
1.Japan’s Coincheck was hacked in a theft of over half a billion dollars worth of digital currency
2. Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing bitcoins worth around half a billion dollars.
3. South Korean exchange Youbit shut down and filed for bankruptcy after being hacked twice.
This is why real safe-haven assets like gold and silver stand alone in providing diversification and privacy no bitcoin can hope to match.
FED + TRADE + NORTH KOREA = SURPRISE?
All told, this week could prove to be an exciting and unpredictable one all around. There are plenty of factors that could impact gold and silver.
We’ve already covered the Federal Reserve meeting and how experts think some little-watched indicators might send gold higher.
Keep an eye this week also on the U.S./Canada trade “discussion,” which could be key to gold in the weeks ahead if it continues its downward spiral.
“The trade-related spat between the U.S. and Canada is becoming more vitriolic. This underscores the fading hopes the U.S. and its major trading partners can avoid an escalation in trade sanctions against each other,” says Jim Wyckoff, senior analyst at Kitco.com. “From a safe-haven perspective, it’s bullish [for gold] because of the tensions between the world’s largest economies.”
Lastly, there’s North Korea. The “sweetheart” results seen so far in front of the television cameras seem to indicate historic progress might be happening with North Korea. At the same time, it pays to keep expectations low!
“The real variable or mystery is gold and market response to the Trump-Kim summit in Singapore,” Wyckoff says. “Obviously, a negative public spectacle would not play well in global markets and create some strong safe haven demand.”
FOREWARNED IS FOREARMED
Every day, we answer many of the same questions about the markets and the future of our country’s economy. I’d like to say the prognosis is great!
But you and I know that there are many things going sideways or even wrong today that could seriously impact your retirement.
The solution is to seek out safe-haven alternatives that can help cushion the blows, diversify and protect you when the rest of the market hits the skids.
It is easy to get started.
It is easy to learn what you need to know to make a good decision about gold or opening a gold IRA.
Let us help you take that first step.